West China Cement downgraded by Moody's

Moody's has downgraded West China Cement (2233.HK) to B1, giving a negative outlook.

"The ratings downgrade reflects WCC’s weakened liquidity and financial profiles, owing to its fast business expansion and a more competitive pricing in the market," said Moody's analyst Jiming Zou in a press release.

The rating reflects what Moody’s perceives to be an overextension by West China Cement, growing by 30 million tons per annum by 2015 with expansion into region such as Xinjiang.

"At the same time, cement demand and prices have not recovered as meaningfully as originally expected, because of overcapacity and subdued investment spending in Shaanxi," Zou said, referring to the company's home territory where it is most established and hold the greatest competitive advantage.

In early September, Standard & Poor's downgraded WCC to a "B+" rating with a negative outlook. Though in mid-August Fitch Ratings released a statement saying that WCC’s low cash flow balance was not of "immediate concern." Though the agency also said that it would be withholding judgment on the possibility of a negative outlook pending news of long-term cash flow and whether or not WCC was sacrificing core markets.
So far in the week, WCC stock has fallen from around 1.40 to 1.32 at the time of reporting.